New RFID Study Investigates the Inventory Management Disconnect Between Brands and Retailers
For several years, retailers such as Macy’s and Target have realized major benefits from item-level Radio Frequency Identification (RFID) and have leveraged the technology to bring their omnichannel strategies to life. Item-level RFID makes retailers more agile in their ability to fulfill the needs of an omnichannel consumer — by providing unprecedented SKU-level inventory accuracy in real time. Using RFID, a retailer can boost sales margins, improve loss detection, and expedite returns — just to name a few of the technology’s benefits.
While RFID’s many benefits have been touted by industry, some retailers continue to delay deploying the technology, often because of misconceptions about its return on investment or a lack of internal expertise on how it can drive supply chain efficiency. New research from the Auburn University RFID Lab and GS1 US helps to prove the value of RFID and provides an eye-opening look at just how error-prone current inventory management systems are when compared to those that leverage RFID.
The study was especially timely as retail is in a state of unprecedented change. New store concepts are rapidly emerging, such as cashierless stores or highly customized experiences, and they all rely on having extremely high on-shelf availability. As consumers become more accustomed to shopping this way, it’s important for the retail industry to work together to evolve the supply chain and take advantage of inventory optimization opportunities through RFID technology.
No other academic institution has studied the use of RFID in retail as closely as Auburn University. The Auburn University RFID Lab specializes in investigating the business case and technical implementation of RFID technology in retail, as well as other supply chain and manufacturing settings.
From June 2017 to July 2018 the Auburn RFID Lab conducted research with eight brands and five retailers. Dubbed “Project Zipper,” the study examined the flow of information between trading partners over a one-year period. Researchers set out to further prove that EPC-enabled RFID technology can help both brands and retailers reach their common goal to accurately send and receive the same number of cases, SKUs, and items per shipment. During this time, the RFID Lab team studied the data obtained from barcode scans at the brand owners’ distribution centers, and the barcode data at the retailers’ distribution centers to determine if the data matched. These same products also included RFID tags, which enabled researchers to simultaneously capture the products’ RFID data. Additionally, these read points were compared to the advanced ship notice (ASN) data.
Overall, the results were surprising. Almost 70 percent of the orders based on legacy barcode scanning that were examined contained a process error. These errors were revealed in picking, shipping, and receiving, resulting in inventory inaccuracies, at best, and claims (i.e., chargebacks) from the retailers to the brand owners, at worst. Brands and retailers generally accept these process errors and attempt “work-arounds,” which often result in additional errors. For example, a verbal conversation between two trading partners to discuss a change in shipment that is never recorded as data is a work-around that can cause negative effects throughout the supply chain.
For the brand owners that use RFID to capture information and reconcile shipments, order accuracy was more than 99.9 percent—only one order contained an error. During this study, those using RFID saw retailer claims completely eliminated. Isolating just the past 10 months of the study, there were no errors, proving that 100 percent reconciliation between brand and retailer is possible.
A deeper dive
In an era of omnichannel retail, which demands high SKU-level inventory accuracy, the errors created in the supply chain process negatively impact a retailer’s ability to deliver products to the consumer in a timely manner. As the findings from this study suggest, at least some of the errors found at the store-level or at the fulfillment center were caused by upstream supply chain information collection and flow.
The study should cause retail industry stakeholders to seriously consider the immediate impact item-level RFID can have on supply chain efficiency and consumer satisfaction. The lack of match accuracy between the brands’ ASNs, and the receipt data from the retailers when they did not use item level RFID is a preventable problem. A failure to address these errors could impact growth, limit sales opportunities, and cause consumer loyalty to plummet.
In only 31 percent of the orders, the barcode-based system ASNs from the brands were fully matched with the inbound barcode data from the retailers. It is important to note that this does not indicate that 69 percent of the orders shipped by brands were completely misaligned. It simply means that the barcode counts of the brand and the retailer didn’t match, and either party may be at fault. In general, barcode auditing processes were found to be more rigorous at the brand distribution centers than the retailer distribution centers.
The study will continue with a Phase 2 analysis of findings requiring more investigation, such as a closer look at what causes the errors or failures in the system and the consequences of work-arounds. Additional use cases for traceability and authenticity will also be investigated in the Phase 2 report, which researchers anticipate will be completed by the end of this year.
In conclusion, this study, using real world source-to-consumer fulfillment, clearly demonstrated that RFID eliminates data errors in the supply chain process, ensuring the accurate flow of information and products. It provides solid evidence that item level RFID improves shipment accuracy and overall communication between brands and retailers — two critical elements to support innovation and surpass the expectations of today’s consumers.
Michelle Covey is Vice President of Apparel and General Merchandise at GS1 US and leads the GS1 US Apparel and General Merchandise Initiative.